By Erin Parker
On Saturday, November 26, Editors BC will present local accountant Jessica Somers and her full-day workshop Tax and Finance for Freelancers. Jessica’s workshop will help to demystify the basic tax and finance issues facing freelancers, including GST/HST registration, bookkeeping and record retention, and building financial stability without a salary.
Erin Parker, co-chair of Editors BC’s professional development committee, recently spoke to Jessica about her advice for editors who are just embarking upon the freelancing life and her unique perspective on a topic that many of us find intimidating.
Hi, Jessica! Thanks for making the time to chat with me.
Could you please begin by telling us a little about yourself and your background in accounting?
Sure! I’m a Chartered Professional Accountant and Certified General Accountant with 10 years’ experience advising small businesses, entrepreneurs, and freelancers in Vancouver on accounting, business, and tax matters. While my focus is supporting local, Vancouver-based businesses, I also practise in U.S. tax for clients who are U.S. citizens or doing business across the border.
This year, I followed in my clients’ footsteps and left my full-time job (giving all my grey suits to charity) to become an entrepreneur myself. Along with a business partner, I founded Cordova Street Consulting in spring 2016. We have a small office in Gastown where we meet with driven clients who are makers, creatives, and leaders doing interesting things in the Vancouver marketplace.
What do you think is the biggest financial challenge freelancers have to overcome?
At first the biggest challenge is getting used to ebbs and flows in income. Budgeting and eating ramen when contracts are scarce, trying not to spend too fast when business is good—you get better at this, right?
As an entrepreneur, I face the same challenge. The accounting industry is very cyclical, with 50% of business happening from February to April. Forecasting expected expenses on an annual basis allows me to budget cash to ensure there are funds to cover business costs during the slower months. You may choose a two-tiered budgeting system (one business budget and one personal budget), or you may prefer one integrated budget. At first budgeting may seem cumbersome or time-consuming, but you get used to it! Also, it can be streamlined by using some of the great apps available. Additionally, some of us are detail-oriented and prefer complex budgets; others see things in a big-picture way and prefer a more high-level budget. Either works—be yourself!
After we get used to the ups and downs of monthly cash flow, the challenge facing freelancers becomes taking care of ourselves for the long run. That involves setting up our own retirement fund, financing extended health benefits, and buying insurance for worries that seem remote. I love the freedom of having my own business, but I know that if I can’t make it work, I have to go back to working in a stiff corporate environment. This motivates me to take care of myself and my business and save for my future so that I can preserve the freedom and independence of entrepreneurship.
What would you advise freelancers to do as a first financial step?
The first step is to keep all your receipts!
The next step is to develop an easy, quick system for invoicing clients, tracking income and expenses, and analyzing that information. There are a lot of options at every price level: everything from pen and paper, Excel, and other free options to paid subscriptions, such as FreshBooks, QuickBooks, Wave, Xero, and so on. It’s important to find something that is efficient; even I don’t spend a lot of time on my own books—I have client work to do! It’s also important to be able to retrieve and analyze information from your bookkeeping system. This way you can understand your financial successes and debrief after setbacks.
Did I mention keep your receipts?
What question do you hear most often from your freelancing clients?
That’s easy! “Do I need to register for GST?”
Many freelancers already know the answer: yes, when you reach the equivalent of $30,000 of contract income over 12 months. However, people are surprised when I talk about the benefits of early GST registration. If you’re comfortable tracking your expenses and keeping records, being registered for GST is relatively simple and gives you access to additional tax credits.
The most important takeaway on the GST issue: if you’re close to the threshold, register!
Lastly, Jessica, what’s one of your favourite books that you’ve read during the past year or so? It doesn’t have to be finance-related!
An all-time favourite novel of mine is Geek Love by Katherine Dunn—it’s one of only two books I’ve ever rebought solely for the purpose of lending to friends. I recently found out that Dunn, like me, is a boxing fan! Dunn covered boxing as a journalist for many years, and last month I read a collection of her work, One Ring Circus: Dispatches from the World of Boxing.
It reads as a series of vignettes as satisfying as any short story collection. Many of the stories are about the people who box, not about fights, and take place as often in the dressing room as in the boxing ring. That being said, for boxing enthusiasts, Dunn’s story “Defending Tyson: The Bite Fight,” originally published in 1997, is a refreshing play-by-play analysis. Dunn must have been relatively alone in her support of Mike Tyson at that time. Dunn’s writing on boxing, like her fiction, exposes humanity in unexpected places.
Thanks for sharing your insights, Jessica! We’ll see you at Tax and Finance for Freelancers on November 26.
Erin Parker is a professional bookworm and full-time freelance editor of trade fiction and non-fiction for adults and young readers. She holds a PhD in English literature from the University of Toronto and has worked in publishing since 2013.
Photo provided by Jessica Somers.